Breaking a fixed rate to avail of house value

M

McNulty

Registered User
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19
Hope someone can help with a breaking fixed rate query

I agreed the price for our house in Jan 06 of EUR310k and the mortgage
actually went through in August with a three year fixed rate (by which time
the house was worth around EUR370k judging by local estate agents). I'm
paying about EUR1250 a month after TRS.

My question is...I now work for a bank who can offer me 2/3rd of the
mortgage at around 3% and the rest at commercial rates - however they will
only do this up to 90% LTV. If I was in a position to do this now I would
probably fit the criteria as houses are now going for about EUR340K in our
estate. If I was to wait until the end of the fixed rate I'm guessing I
will have dropped to negative equity and no-one will touch me with a
bargepole - even work.
I would need to break the fixed rate and I'm not sure of the costs of this
(different lender as well). Is it worth my while? Any ideas - is a worry at
the moment as the Mrs is on (state paid) maternity leave and probably not
going back to work at the Creche fees outweigh the benefit.
 
You should find out exactly how much it is to break the fixed rate and crunch the numbers. You need to also calculate the blend of the 3% and the "commercial rate" for the amount you want. For e.g. if the "commercial rate" is 6%, then your blended rate is 4%, which is pretty good. Do you have a HR dept that can talk you through this? Presume the 3% is part of an employee benefit package so they should be able to tell you exactly what your repayments are.

First thing you need to do is find out what your penalty is for breaking the fixed rate mortgage. Then find out how long the 3% lasts (e.g. will that go up at any stage? Do you lose this rate if you leave the bank?) You also have to factor in legal costs for switching but if you can get an overall rate of 4% for the entire mortgage, then that's a really good rate.

Sprite
 
You also need to consider potential BIK tax liability on the cheap mortgage.

I remember around 2001 a punter walking in off the street mortgage was cheaper than a bank staff mortgage and the bank staff member had to pay BIK on their already more expensive mortgage as the Revenue were using 5% or something as the "market" rate to calculate BIK against.
 
Thanks both - appreciate it. I will have a proper look at all the numbers and see where we end up. I'd forgotten about BIK!
 
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